IEA sees no robust demand recovery for crude oil just yet

Demand for crude oil has yet to recover substantially from the economic crisis, the head of the IEA said on Monday, but lack of investment could lead to a supply crunch in the medium term.

IEA Executive Director Nobuo Tanaka, who was in Madrid to unveil a review of Spanish energy policy, declined to comment on specific crude prices, but said they showed the global economy may not be recovering quickly.

“In the short-term, the current price level is affecting the supply / demand situation in a way that we haven’t seen much of a robust demand recovery yet,” Tanaka told reporters.

The IEA, adviser to 28 industrialised economies, estimated earlier this month world oil consumption would average 84.4 million bpd in 2009, or 2.2 percent down from 2008 due to the economic downturn.

Tanaka said the IEA was still concerned that current investment in energy may not be enough to meet demand, as and when the economy does recover. “When the economic recovery happens, as many international organisations are expecting, we may see a very tight market toward 2014 and 2015,” he told a conference at Spain’s Industry Ministry.

Earlier this year, the IEA said a price of $75 a barrel for crude was needed to lure investment in offshore fields and oil sands, but only after the economy has recovered. Benchmark Brent crude slumped in early dealing on Monday and extended sharp loses posted last week as investors focused on high inventories and sluggish demand.

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